Great blog posts about macroeconomics

Costs of Higher Education: A Reality

As a student at a private, for-profit collegiate institution, I am well aware of the ever-growing costs of tuition. This is quite evident for me as I compare tuition at Holy Cross to my sister’s tuition at Smith College, another private, for profit institution, who is 8 years my senior. When my sister was a junior at Smith, tuition for both semesters, including room and board, was approximately $52,000 adjusted in 2016 dollars. Even from just my freshman to junior year and accounting for inflation, the cost of tuition at Holy Cross has increased by $4,000 (this past year costing $64,608.15).

Looking back even further, I asked my friend’s dad how much tuition was for him the year he graduated Holy Cross. His answer? Including room and board, approximately $6,000 in 1979. Adjusted using CPI index equates to just short of $20,000 for the year, about $3,000 above the national average for private colleges according to College Board.

The cost of higher education at private colleges and universities has increased 6% above the rate of inflation. According to US News, even from 1995 to 2013, average tuition costs have increased by more than 100%.

So why is tuition rising faster than any other goods and services?

Simple supply and demand graph. Since 1971 to 2013, enrollment in higher education has more than doubled. This increase in demand is likely due to the continued thought that a bachelor’s degree gets a good return in the future. Alongside of that, a high school diploma does not get as far as it once did. Therefore, increased demand leads to higher prices.

Amenities, amenities, amenities. The amount of student services colleges provide these days are also part of the reason for the disparity in tuition costs from the 70’s to now. Many of these student services require hiring more faculty, driving up costs for the college. These services range from counseling to academic assistance to career development.

Loss leader. Colleges and universities are spending more and more money on maintaining the ascetic of campus appeal hoping that they will see a return by attracting more perspective students. Athletics are another prime example of this. Universities put money into athletic departments hoping that schools with good athletics will draw in students and local fans.

Shrinking subsidies. Private colleges have been receiving smaller and smaller subsidies from the government to help with costs, thus making tuition higher to compensate the loss.

All in all, many teenagers are seeing the potential returns of a bachelor’s degree to outweigh the ever-growing costs of tuition.

7 thoughts on “Costs of Higher Education: A Reality”

One topic I liked to discuss with my friends during the elections was Bernie Sander’s promise to make public tuition free. It was often slated in Sander’s platform that the rising costs of higher education were to be attributed to greed and inefficiency (or that’s what I think was a general accord among his supporters). But this post reinforces the idea that college education is a good, a scarce good like any other commodity item in our economy. As the world becomes more interconnected and competition rises, social norms are going to push high school grads to pursue their bachelors to get a job in today’s global market. The number of college seats is limited and increased demand for education is only going to raise prices

I think that amenities is a huge part of rising college tuitions. Besides the academic support departments that you mentioned, like Career Services, many schools have amenities that have nothing to do with education — like rock walls, swimming pools, and golf courses. While these attract students, they also contribute to the increase in cost.

I happen to agree that the demand for a college degree is only going to increase as time goes on, with more and more manual labor jobs being replaced by robots. I am confused as to why government subsidies have actually declined recently. It would make more sense if they offered higher subsidies to colleges and universities. I think it is also important to point out how colleges and universities outside the U.S. are much cheaper than in. You could argue that our universities are superior to other countries, but prestigious institutions such as Cambridge and Oxford are constantly ranked at least to par with our leading universities and are offered at less than half the price…

I think part of the problem is that people consistently want name-brand colleges, such as Holy Cross, and pay for the reputation of the school just as much as for the actual education. This means that colleges have no incentive to not raise their price because they know that students will still pay to go there.

Great post. I think the supply and demand part of the post is a huge part of the problem. When our parents were our age, not as many people went to college. A high school diploma got you a decent job. However, the norms have changed and everyone is expected to go to college. If you don’t, there is a small chance you’ll live comfortably. The increase in demand for a college education allows universities to charge more, which is a problem because salaries aren’t increasing. I wonder how the system will change in 25 years.

Competition between colleges has increased with the rise in demand as high school diplomas become outdated in the workforce. It seems this has led to the need to distinguish themselves from their competitor schools, which leads to the extravagant amenities and services on campuses. A college degree has gone from a valuable asset to a necessary catalyst for starting a career in today’s society.

I think this is a really interesting article considering just how much the price of college has increased over the years when you account for inflation. Although prices have skyrocketed, I feel that with an extremely competitive workforce it almost makes sense why school cost so much. We live in a world where a college degree is almost required to get even a decent job. College education is an investment for the future.